Question

Which of the following appears as a line item in a contribution margin income statement?

A) Gross profit
B) Total cost of goods sold
C) Operating income
D) Total selling and administrative expenses

Answer 1

Total selling and administrative expenses appear as a line item in a contribution margin income statement, not gross profit or total cost of goods sold which are used to calculate the contribution margin.

Step-by-step explanation:

The item that appears as a line in a contribution margin income statement from among the options provided is Total selling and administrative expenses. The contribution margin income statement focuses on the separation of fixed and variable costs. It highlights the contribution margin, which is calculated by subtracting variable costs from sales revenue, not the gross profit as traditional income statements do. Therefore, total selling and administrative expenses, which are usually considered fixed costs, are listed as a line item in this type of statement, unlike the total cost of goods sold (variable costs) which would have already been deducted to find the contribution margin.